Investor Relations
Presentation
Best way to invest in fast growing global energy efficiency
and renewable energy generation businesses
1n One of the highest growth capital goods companies; number one or
number two in all product lines in Latin America
2n Unique business model is based on vertical integration, production
flexibility and technological innovation
3n Diversified product lines allows strong growth across different market
cycles
4n We have a history of achieving CAGR of 18% over past 17 years through
organic growth and accretive acquisitions
5n WEG 2020 Strategic Plan aims for R$ 20 billion / 17% CAGR through
international and product line expansion
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
1
Sustainable growth
WEG’s revenue growth and margins are among the highest in the
industry
Profitability (EBITDA Margins)
Revenues Growth (US$)
23,1%
CAGR 2005-2009
24,0%
CAGR 2009-2013
22,0%
19,3%
E
20,0%
WEG
18,0%
11,3%
9,1%
6,6%
4,9%
6,3%
3,7%
3,0%
C
16,0%
5,2%
14,0%
4,0%
1,7%
B
A
12,0%
F
D
10,0%
-0,1%
-3,0%
A
WEG
B
C
D
BM&F Bovespa: WEGE3 / OTC: WEGZY
E
F
8,0%
2009
2010
2011
2012
June 2014
2013
2
Our industry is undergoing major shifts
Megatrends are creating changes in demand patterns and new business
opportunities
Energy and
industrial efficiency
Renewable energy
ƒElectric motors represent
ƒGlobal drive to lower GHG
around 70% of all industrial
consumption of electricity, or
25% of worldwide general
electricity consumption;
ƒElectricity consumption is by
far the largest component of
total cost of ownership of
electric motors (may exceed
95%) for industrial clients;
ƒClear regulatory trend towards
minimum levels of electric
motor energy efficiency (lower
needs to expand generation);
ƒIndustrial productivity and
emissions;
ƒRenewables allow distributed
generation, closer to
consumption and requiring
lower T&D infrastructure;
ƒEconomic viability is highly
dependent on scale. With
correct price incentives,
technology catches up with
economics;
ƒDiversity of sources increases
systems stability and energy
availability. No energy is the
most expensive energy of all.
energy management drives
investments.
BM&F Bovespa: WEGE3 / OTC: WEGZY
Smart grid
ƒElectricity distribution grid is
evolving and becoming
”smarter”;
ƒAll nodes of the system, from
generation to consumptions
(and everything in between)
must be aware of conditions
and able to respond to
changes;
ƒEvery existing electric product
must evolve. There will be
more sensors, more
automation, more efficient
generation and use of
electricity;
ƒNew products are being
developed and change is just
now starting.
Electrical mobility
ƒIncreasing urbanization adds to
congestions and need of
alternatives;
ƒGHG and other pollutants
emitted by internal combustion
engines powered vehicles are
well above sustainable levels;
ƒElectricity is clearly a more
efficient use of energy to power
vehicles. Pure electric, hybrids
and alternative fuels will grow
faster than the market;
ƒPowertrain solutions are
scalable to all vehicle types
and sizes and to other
transportation modes (WEG
has commercially available
solutions in maritime
powertrains)
June 2014
3
“End to end of the wire”
The global solution in electric machines and automation for the
industry and energy systems
Generation
WEG’s strategic vision is to provide
complete and efficient solutions with a
complete line of electrical machines,
from the generation all the way to the
consumption.
This means that we want to continue to
be a competitive supplier of electrical
equipment for typical applications. For
example, WEG is one the world's
largest supplier of industrial electric
motors used by OEM in the
manufacturing pumps, compressors
BM&F Bovespa: WEGE3 / OTC: WEGZY
Transmission Distribution
Industrial use
and industrial fans, the typical uses of
such products.
We also can use this production
competitiveness and flexibility and our
broad product line to integrate those
products into a complete solutions.
We can combine electric motors of
several types and sizes with the drives
and controls to create complex industry
automation systems. Or complete
solutions for electricity generation from
Electric
traction
Building
Automation
renewable sources. Or complete
energy substations for just about any
use. Important to note that these
systems are basically comprised of
WEG manufactured products.
This integrated approach based on
competitive manufacturing capabilities
has been the basis of our market
presence and how we present
ourselves to our clients and to the
general market.
June 2014
4
Strategic Positioning
WEG offers a complete range of electric products and systems with an
integrated one-stop solution
Motors
Fractional
Industrial
High Voltage
Gear boxes
Energy
Alternators
Thermal (Biomass)
Small Hydro
Wind
Solar
T&D
Power Trafos
Dry Trafos
Distribution Trafos
Automation
Substations
Drives
Controls
Panels
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
5
Clear competitive advantages
Unique business model creates important and defensible competitive
advantages
Vertical Integration
Vertical integration allows
production flexibility to
competitively supply small batches
of highly customized products that
are matched to perfection to our
customers’ needs. We do mass
customization, not mass
production.
Diversification
Our production flexibility allows us
to target the markets
(geographies, segments and
products) that offer the best
growth perspectives. It also
allows us to target markets based
on returns, not on our needs to
occupy specialized production
capacity.
Modular Expansion
Financial Flexibility
Financial flexibility allows WEG to
pursue growth opportunities as
they become available. These
opportunities range from trivial,
like raw materials procurement at
attractive conditions, to strategic,
like acquisitions .
BM&F Bovespa: WEGE3 / OTC: WEGZY
Our production system is also
based on modular expansion,
avoiding idle capacity build up,
maximizing returns on capital e
lowering demand risks.
Global Presence
The diversity of our product offering also allows us
to expand internationally, leveraging the expertizes
we have developed into new markets and being a
premier partner for our global customers
June 2014
6
WEG business
Diversified product line allows for strong growth across different
market cycles
Energy Generation,
Transmission and
Distribution (GTD)
Energy
Industrial ElectroElectronic Equipment
Electric Motors
Automation
T&D
Automation
Motors for domestic use
Electric Motors
Coatings
Paints and Varnishes
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
7
Solid growth track record
Business model allows us to find and explore growth opportunities,
even under unfavorable macroeconomic conditions
17,2%
19,3%
18,4%
18,0%
18,0%
851
789
462
475
381
293
256
188
133
119
96
67
617
812
1.017
1.021
839
CAGR
18.4%
ROIC
18,2% 18,3%
16,7%
15,9%
15,3%
14,9%
13,1%
12,6%
20,5%
16,4% 16,5%
59
16,5%
22,4% 22,7%
21,5%
1.230
6.174
15,7%
21,2%
18,1%
Net Income (R$ million) and Net Margin
18,5%
23,5% 24,1% 22,8%
22,5%
22,5%
20,7%
5.189
4.392
4.211
4.502
3.749
3.009
2.515
2.204
1.694
1.282
1.066
800
628
527
466
372
353
CAGR
17,9%
EBITDA (R$ million) and EBITDA Margin
6.829
Revenues (R$ million)
12,4% 13,0% 11,8%
11,3%
10,9%
12,4%
14,7%
10,6%
14,3%
BM&F Bovespa: WEGE3 / OTC: WEGZY
12,1%
11,8%
656
587
519
549
560
503
375
403
308
220
176
125
82
98
58
41
30
CAGR
20.4%
575
843
13,5%
10,4%
10,0%
10,3%
June 2014
8
WEG Strategic planning process
We adopted a bottom–up approach, selecting the individual
opportunities that offered the best fit to clear strategic guidelines
Opportunities
Discovery
The process started with the
involvement of management at
all levels, from market-facing
mid-level managers to senior
C-level officers, that discussed
recent evolution, trends and
growth opportunities, current
and future, in all our core and
adjacent markets.
Business
analysis
The ideas were developed into
business plans, including
market assumptions, earnings
and cash flow projection
models, so each opportunity
could be assessed in terms of
its expected results and
margins.
BM&F Bovespa: WEGE3 / OTC: WEGZY
Capital Requirement
analysis
Risk adjusted ROIC
analysis
The analysis then considered
the capital intensity of each
opportunity. The results and
margins are not necessarily
good or bad, they must be
considered within the context
of the capital required to
pursue the growth opportunity.
The net result is ROIC.
Finally, each opportunity was
assessed in terms of
identifiable, business-related,
non-systemic risks. This was
then used to adjust the ROIC,
or ROIC’
June 2014
9
WEG Strategic Plan 2020
20.000
Corporate aspiration of R$ 20 billion by 2020. Growth comes from
diverse base, with a disciplined approach to organic and non-organic
expansion
CAGR
17.9%
1/3
Non Organic
CAGR
17%
2/3
Organic
20.000
6.829
11%
6.174
5.189
4.392
18%
19%
Base
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
10
Growth drivers
The growth opportunities identified can be separated into
three distinct categories/growth strategies
Our products / markets enjoy fairly healthy
organic growth trends. For example, the global
market for industrial use electric motors is
independently estimated to grow 5% to 10% per
year. If we are able to maintain our market
positions, either leadership and / or strong brand
recognition, we will be in position that advantage
of this healthy growth dynamics;
“More and
Better”
We will continue to expand into
We will also continue to
new geographies, initially with
expand the product line into
industrial electric motors. As
business / products that
we have established market
positions and/or recognized
brands, we will leverage those
to synergistically expand the
product line.
complement the offering and
International
Expansion
BM&F Bovespa: WEGE3 / OTC: WEGZY
New
Businesses
allows us to offer our clients
more complete and efficient
solutions.
June 2014
11
Portfolio Strategy
Clear vision of attractiveness of opportunities and of the
strategic fit
2010
Market Access
2011
2010
2011
2011
March 2014
September 2013
2012
2011
2012
February 2014
2012
2010
2010
Technology
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
12
Revenue profile
2008
2013
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
13
Global production platform
4%
15%
31%
2013
2008
65%
50%
35%
Produced and sold in Brazil
Produced in Brazil and exported
Produced and sold abroad
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
14
Use of cash
Capex (R$ million)
Research & Development (R$ million)
10,2%
% of Net Revenues
9,3%
8,0%
8,1%
7,4%
6,8%
6,1% 6,1%
% of Net Revenues
2,5%
2,5% 2,4%
2,3%
6,5%
5,8%
2,5%
2,3%
2,3%
2,0% 2,0%
5,4%
1,7% 1,6% 1,8%
5,3%
457
3,6% 3,9%
131
3,6%
305
42
38
49
73
83
238 244
226 233
188
146
126
183
1,5%
148
3,7%
206
2,7%
2,4%
63
111
16
Working Capital (% of Net Revenues)
18
18
21
30
73
86
89
101
83
34
Net Earnings and Dividends (R$ million)
50,0%
40,0%
30,0%
Working Capital
20,0%
Clients
Inventories
10,0%
Advances
Suppliers
0,0%
1Q06
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
BM&F Bovespa: WEGE3 / OTC: WEGZY
1Q13
1Q14
June 2014
15
Capital markets information
Issuer
ƒ WEG S.A.
Ticker
ƒ WEGE3 (BM&Fbovespa) / WEGZY (OTC – ADR Level 1).
Listing Segment
ƒ Novo Mercado (since 2007)
Number of Shares
ƒ Issued:
ƒ In treasury:
ƒ Ex-treasury:
Share price
ƒ On Dec 30, 2013: R$ 23.97
ƒ On May 30, 2014 : R$ 26.01
Market value
ƒ On Dec 30, 2013: R$ 19.3 billion
ƒ On May 30, 2014 : R$ 21.0 billion
Liquidity (average
daily volume)
ƒ In 2013: R$ 15,193 thousand / day
ƒ In 2014: R$ 15,896 thousand / day
Composition of
ƒ 56% - Foreign institutions
ƒ 03% - Brazilian institutions
ƒ 41% - Others (individuals, etc.)
Free Float
BM&F Bovespa: WEGE3 / OTC: WEGZY
807,176,538
615,564
806,560,974
June 2014
16
Shareholding structure
Voigt
33.3%
Founders’
Families
(directly)
Silva
33.3%
WPA
Participações e
Serviços S/A
14%
Werninghaus
33.3%
Treasury and
Management
50%
1%
Free Float
35%
WEG S.A.
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
17
WEGE3 performance
28,00
26,00
Selected for
ISE 2014
24,00
WEGE3 share prices (R$)
22,00
Selected for
ISE 2013
Inclusion
Ibrx-100
20,00
18,00
Inclusion
MSCI Brazil
16,00
14,00
12,00
10,00
8,00
6,00
BM&F Bovespa: WEGE3 / OTC: WEGZY
June 2014
18
18
Highlights
Yearly Figures
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Quarterly Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
2013
6.828.896
3.432.040
3.396.856
1.569.891
2.236.766
32,8%
843.467
12,4%
1.230.032
18,0%
1,35950
2012
6.173.878
3.016.662
3.157.216
1.610.330
1.880.856
30,5%
655.979
10,6%
1.016.748
16,5%
1,05730
%
10,6%
13,8%
7,6%
-2,5%
18,9%
28,6%
21,0%
28,6%
2011
5.189.409
2.902.958
2.286.451
1.361.689
1.556.051
30,0%
586.936
11,3%
851.155
16,4%
0,94605
%
19,0%
3,9%
38,1%
18,3%
20,9%
11,8%
19,5%
11,8%
Figures in R$ Thousands
BM&F Bovespa: WEGE3 / OTC: WEGZY
19
Highlights
Quarterly Figures
Q1 2014
Q4 2013
1.783.543
1.893.299
-5,8%
1.477.577
Domestic Market
895.446
913.388
-2,0%
772.935
External Markets
888.097
979.911
-9,4%
704.642
375.677
570.421
32,0%
204.887
11,5%
299.643
16,8%
0,33023
428.229
615.847
32,5%
237.439
12,5%
341.653
18,0%
0,38270
-12,3%
-7,4%
353.077
463.604
31,4%
172.299
11,7%
248.898
16,8%
0,27772
Net Operating Revenue
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
%
-13,7%
-12,3%
-13,7%
Q1 2013
%
20,7%
15,9%
26,0%
6,4%
23,0%
18,9%
20,4%
18,9%
Figures in R$ Thousand
BM&F Bovespa: WEGE3 / OTC: WEGZY
20
Highlights
Balance sheet – Assets
(R$ thousands)
March 2014
(A)
R$
%
CURRENT ASSETS
December 2013
(B)
R$
%
March 2013
(C)
R$
%
(A)/(B) (A)/(C)
6.602.879
67%
6.851.787
68%
6.310.741
66%
-4%
5%
Cash & cash equivalents
3.247.375
33%
3.373.799
33%
3.279.518
35%
-4%
-1%
Receivables
1.576.829
16%
1.658.806
16%
1.347.331
14%
-5%
17%
Inventories
1.461.766
15%
1.445.927
14%
1.316.606
14%
1%
11%
Other current assets
316.909
3%
373.255
4%
367.286
4%
-15%
-14%
LONG TERM ASSETS
Long term securities
Deferred taxes
134.326
2.097
68.870
1%
0%
1%
123.866
2.230
60.376
1%
0%
1%
107.528
2.059
43.337
1%
8%
0% 0%
14%
25%
2%
59%
63.359
1%
61.260
1%
62.132
1%
3%
2%
3.161.488
32%
3.165.640
31%
3.078.166
32%
0%
3%
8.091
0%
7.264
0%
7.577
0%
11%
7%
2.605.834
26%
2.614.556
26%
2.544.242
27%
0%
2%
547.563
6%
543.820
5%
526.347
6%
1%
4%
9.898.693
100%
10.141.293
100%
9.496.435
100%
-2%
4%
Other non-current assets
FIXED ASSETS
Investment in Subs
Property, Plant & Equipment
Intangibles
TOTAL ASSETS
BM&F Bovespa: WEGE3 / OTC: WEGZY
21
Highlights
Balance sheet – Liabilities
(R$ thousands)
March 2014
(A)
R$
%
CURRENT LIABILITIES
December 2013
(B)
R$
%
March 2013
(C)
R$
%
(A)/(B) (A)/(C)
2.506.714
25%
2.578.048
25%
2.852.160
30%
-3%
-12%
Social and Labor Liabilities
199.637
2%
216.553
2%
172.007
2%
-8%
16%
Suppliers
379.952
4%
420.250
4%
365.492
4%
-10%
4%
Fiscal and Tax Liabilities
137.847
1%
139.570
1%
103.069
1%
-1%
34%
Short Term Debt
914.246
9%
912.796
9%
1.526.274
16%
0%
-40%
47.016
0%
87.723
1%
36.718
0%
-46%
28%
469.261
5%
459.130
5%
306.889
3%
2%
53%
44.201
0%
34.191
0%
38.260
0%
29%
16%
314.554
3%
307.835
3%
303.451
3%
2%
4%
LONG TERM LIABILITIES
2.822.456
29%
2.920.978
29%
2.528.789
27%
-3%
12%
Long Term Debt
2.192.311
22%
2.296.208
23%
1.878.432
20%
-5%
17%
98.307
1%
95.031
1%
123.063
1%
3%
-20%
Deferred Taxes
292.073
3%
294.405
3%
319.621
3%
-1%
-9%
Contingencies Provisions
239.765
2%
235.334
2%
207.673
2%
2%
15%
77.959
1%
84.495
1%
80.931
1%
-8%
-4%
STOCKHOLDERS' EQUITY
4.491.564
45%
4.557.772
45%
4.034.555
42%
-1%
11%
TOTAL LIABILITIES
9.898.693
100%
10.141.293
100%
9.496.435
100%
-2%
4%
Dividends Payable
Advances from Clients
Profit Sharring
Other Short Term Liabilities
Other Long Term Liabilities
MINORITIES
BM&F Bovespa: WEGE3 / OTC: WEGZY
22
Highlights
Balance sheet – Cash flow
(R$ thousands)
3 Months
2014
3 Months
2013
Operating Activities
Net Earnings before Taxes
Depreciation and Amortization
Provisions:
Changes in Assets & Liabilities
(Increase) / Reduction of Accounts Receivable
Increase / (Reduction) of Accounts Payable
(Increase) / Reduction of Investories
Income Tax and Social Contribution on Net Earnings
Profit Sharing Paid
269.317
58.805
88.495
(12.641)
118.511
50.259
(10.915)
(81.448)
(89.048)
221.413
52.136
67.655
(6.294)
91.360
46.754
(10.480)
(71.190)
(62.738)
Cash Flow from Operating Activities
403.976
334.910
Investment Activities
Fixed Assets
Intagible Assets
Results of sales of fixed assets
Accumulated Conversion Adjustment
Long term securities bought
Goodwill in Capital Transactions
(64.284)
(3.208)
490
(53.618)
132
(2.699)
(56.759)
(811)
903
(25.135)
(4.497)
(5.169)
(5.947)
(13.229)
(6.268)
-
Cash Flow From Investment Activities
(142.363)
(97.736)
Financing Activities
Working Capital Financing
Long Term Financing
Interest paid on loans and financing
Treasury Shares
Dividends & Intesrest on Stockholders Equity Paid
16.382
(112.601)
(43.588)
(248.230)
827.186
(136.811)
(11.277)
(204.724)
Cash Flow From Financing Activities
(388.037)
474.374
Change in Cash Position
(126.424)
711.548
Beginning of Period
3.373.799
2.302.256
End of Period
3.247.375
3.013.804
Acquisition of Stakes of non-controlling shareholders
Aquisition of Subsidiaries
Cash & Cash Equivalents
BM&F Bovespa: WEGE3 / OTC: WEGZY
23
Highlights
Balance sheet – Debt and cash position
(R$ thousands)
Março 2014
Dezembro 2013
Março 2013
Cash & Financial instruments
3.249.472
3.376.029
3.281.577
- Current
- Long Term
3.247.375
2.097
3.373.799
2.230
3.279.518
2.059
Debt
3.106.557
100%
3.209.004
100%
3.404.706
100%
914.246
29%
912.796
28%
1.526.274
45%
- In Brazilian Reais
503.749
16%
462.336
14%
1.077.205
32%
- In other currencies
410.497
13%
450.460
14%
449.069
13%
2.192.311
71%
2.296.208
72%
1.878.432
55%
1.976.524
64%
2.048.766
64%
1.646.899
48%
215.787
7%
247.442
8%
231.533
7%
- Current
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
BM&F Bovespa: WEGE3 / OTC: WEGZY
142.915
167.025
(123.129)
24
WEG Investor Relations
Contacts
ƒ Sérgio Luiz Silva Schwartz
Investor Relations Officer
ƒ Luís Fernando M. Oliveira
Investor Relations Manager
+55 (47) 3276-6973
luisfernando@weg.net
twitter.com/weg_ir
June 2014
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